Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions. Even the best short-sellers know, it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.
This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks every week to help enhance your portfolio returns.
With that in mind, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.
My first earnings short-squeeze trading opportunity is omnichannel video game retailer GameStop (GME) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect GameStop to report revenue of $3.1 billion on earnings of $2.29 per share.
The current short interest as a percentage of the float for GameStop is very high at 24.1%. That means that out of the 99.65 million shares in the tradable float, 24.05 million shares are sold short by the bears.
I would wait until after GameStop reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $25.30 to its 200-day at $25.56 and then above more resistance at $26.27 to $27.37 with volume that hits near or above 2.60 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $31.29 to its 52-week high of $33.72 a share.